Non recourse factoring: what it covers when a broker goes under, and what it never covers

QUICK ANSWER

Non recourse factoring means the factor absorbs the loss if an approved broker can't pay because of a credit event, usually insolvency or bankruptcy. It doesn't cover disputes, cargo claims or paperwork errors. Recourse factoring sends any unpaid invoice back to you after a set window. Non-recourse usually costs more.

Source:

A three-truck fleet can easily have $30,000 out with one broker at once: a dozen loads over three weeks, all waiting on the same accounts payable department. If that broker closes its doors, the question is simple. Who eats the $30,000? Non recourse factoring is the answer some factors sell, and it's narrower than most owners think.

The short version

Recourse: the factor advances on your invoice, but if the broker doesn't pay within the contract's window, the invoice comes back to you. Cheaper.

Non-recourse: if an approved broker can't pay because of a covered credit event, the factor absorbs it. More expensive, and the covered events are specific.

RTS Financial, the factor we refer carriers to, states that it provides non-recourse factoring and defines it as the factor assuming the credit risk if a customer can't pay because of issues like insolvency or bankruptcy RTS Financial recourse termsNon-recourse: RTS assumes the credit risk if the customer can't pay because of insolvency or bankruptcyRTS Financial trucking factoring page: RTS provides non-recourse factoring, assuming the credit risk if your client doesn't pay, and defines non-recourse as covering a customer that can't pay because of issues like insolvency or bankruptcy. Disputes and paperwork problems are not described as covered.RTS Financial, trucking factoring, 2026Checked Oct 2026.

Coverage map

USUALLY COVERED

Credit events on approved brokers

Broker files for bankruptcy
Broker is insolvent and can't pay
Broker shut down owing on approved invoices
Only brokers the factor approved before you hauled
Clause words: insolvency, bankruptcy, financial inability to pay

USUALLY NOT COVERED

Everything about the load itself

Broker disputes the load (late, damaged, short)
Cargo claims and deductions
Missing or wrong paperwork
Charges the broker never approved
Clause words: dispute, offset, claim, short-pay, chargeback

General pattern, not any one factor's contract. Your agreement lists the covered events.

The left column is what non-recourse protects. The right column is where most unpaid invoices actually come from. A broker that says "the load was late, we're paying $200 less" isn't insolvent. That short-pay is yours under almost any contract.

The price of protection

Non-recourse costs more because the factor carries more risk. Trade coverage published in July 2026 puts recourse at about 1.5% to 3.0% per invoice and non-recourse at 2.5% to 5.0% Freight factoring rate and fee ranges (trade coverage)Recourse 1.5-3.0%, non-recourse 2.5-5.0% per invoice; ACH $2-15, wire $10-35FreightWaves contributed article, July 1, 2026: recourse 1.5% to 3.0% per invoice, non-recourse 2.5% to 5.0% (spot non-recourse 3% to 6%); ACH $2 to $15 and wire $10 to $35 per transfer; expedited funding 0.25% to 1.0%; credit checks $10 to $50 per customer; setup $100 to $500; minimum-volume penalties $250 to $1,000+ a month; early termination $500 to $5,000+. Ranges from industry sources, not a survey.FreightWaves (contributed), Jul 1, 2026, 2026Checked Oct 2026. An RTS Financial article says non-recourse agreements often carry a higher rate, sometimes almost a full percentage point more Non-recourse premium (RTS Financial article)Non-recourse agreements often carry a higher rate, sometimes almost a full percentage point moreRTS Financial, Recourse vs non-recourse factoring (January 2019): non-recourse agreements typically have a higher factoring rate, sometimes close to a full percentage point higher; protection usually applies only to specific events such as a debtor's bankruptcy, and only for debtors with good credit.RTS Financial blog, Jan 2019, 2019Checked Oct 2026.

EXAMPLE A fleet factors $60,000 a month. At a 0.75 point premium, non-recourse costs $450 more each month, or $5,400 a year. That's the price of protection against a broker bankruptcy. If your largest single exposure to one broker is about $15,000, the premium pays for itself only if a covered failure hits you about once every three years.

Run the full fee math on the factoring rates page.

Reading the contract

This is general guidance, not legal advice. If a clause is unclear, ask the factor in writing or have a professional read it.

Covered events. Look for the exact words. "Insolvency" and "bankruptcy" are typical. If the contract says "credit risk" without defining it, ask what it means.

Approved brokers. Non-recourse usually applies only to brokers the factor approved before you hauled. A load for an unapproved broker may be factored on recourse terms, or not at all.

Credit limits. Some factors cap how much they'll carry on one broker. Invoices above that limit may fall back to recourse.

Recourse window. On recourse deals, how many days until an unpaid invoice is charged back? Thirty days past due and ninety days past due are very different deals.

Chargeback method. How the factor takes the money back: from your reserve, from future advances, or by asking you to repay.

Disputes clause. What happens when a broker disputes a load. You'll almost always need to help resolve it, and the invoice may be charged back while you do.

Checking broker credit yourself

Non-recourse or not, the cheapest unpaid invoice is the one you never hauled. Check before you book:

The factor's credit check. Most factors rate brokers in their app or portal. The RTS app shows credit ratings on thousands of brokers and shippers RTS appInvoice uploads, purchase status, broker and shipper credit ratings, load board, fuel map; iOS, Android and webRTS Financial app page: invoice uploads and purchase status for factoring, credit ratings on thousands of brokers and shippers, a load board with lane alerts, a fuel map, driver and truck profiles, on mobile (App Store, Google Play) and web.RTS Financial, RTS app, 2026Checked Oct 2026.
FMCSA registration. Confirm the broker holds active broker authority and has its $75,000 financial security on file Broker financial security$75,00049 CFR 387.307: property brokers must hold a $75,000 surety bond or trust fund agreement.49 CFR 387.307Checked Oct 2026. Since January 16, 2026, FMCSA suspends a broker whose security drops and isn't replenished within seven days of notice Broker financial responsibility ruleIn force January 16, 2026: a broker whose $75,000 security drops and isn't replenished within 7 days of FMCSA notice is suspendedFMCSA's broker and freight forwarder financial responsibility rule (compliance date January 16, 2026): if a broker's financial security falls below the $75,000 minimum and is not replenished within seven calendar days of FMCSA's notice, FMCSA suspends its operating authority. Sureties and trust providers must notify FMCSA when coverage drops.FMCSA, broker financial responsibility (Jan 2026), 2026Checked Oct 2026.
Name and MC match. Make sure the broker on the rate con is the one you checked. Double-brokering and identity fraud often start with a familiar name and a different MC number.
Payment signals. Ask other carriers or your dispatcher how the broker pays. A broker suddenly offering well above market rates, with long terms, deserves a second look.

Warning signs of a broker in trouble: payments slipping from 30 to 45 to 60 days, short-pays on ordinary loads, a new "payment processing" company in the remit-to line, and contacts who stop returning calls.

What non-recourse doesn't cover, again

It bears repeating, because it's the most common surprise:

Disputes over service: late delivery, missed appointment, refused load
Cargo claims: damage, shortage, temperature problems on reefer loads
Paperwork errors: missing signatures, wrong amounts, no POD
Unapproved charges: detention or lumper costs the broker never agreed to in writing
Fraud you took part in, knowingly or not, such as hauling for a broker you didn't verify

Those stay with the carrier under almost any factoring agreement. Good paperwork and broker checks protect you more than the recourse label does. That's our view from the dispatch desk, and it's why a broker check belongs before every load, not after.

Read the freight factoring guide for the full picture of how factoring works across a fleet.

This page explains common contract patterns. It isn't legal advice; your agreement defines what's covered.

Recourse and non-recourse questions

What is non-recourse factoring?

It's factoring where the factor carries the credit risk on approved brokers. If an approved broker can't pay because it's insolvent or bankrupt, the factor takes the loss instead of charging the invoice back to you. The exact covered events are written in the contract, and they're usually narrow.

What is recourse factoring?

Recourse factoring means you remain responsible if a broker doesn't pay. After a set number of days in the contract, the unpaid invoice comes back to you, usually deducted from future advances or reserves. In exchange, recourse rates are typically lower.

Is non-recourse factoring worth the higher fee?

It depends on your brokers. If most of your invoices go to large, established brokers, the chance of a bankruptcy is small and recourse may cost less overall. If you have a lot of money out with one or two smaller brokers, the protection is worth more. Run both quotes.

How do I read the recourse clause?

Look for three things: which events count as covered (often only insolvency or bankruptcy), how many days pass before an unpaid invoice is charged back, and which brokers are approved for non-recourse. If disputes or short-pays appear anywhere, they're almost always your responsibility.